School of Economic Science - Study Forums

[Joseph Milne]

May I pose a simple question?

I have been trying to get to grips with the nature of money and banking recently, which I have always found elusive. I think things have become much clearer through the videos of Positive Money http://www.positivemoney.org.uk/

My question is: should an individual obtain a loan for some luxury he desires?

The reason I ask this is because it seems to me to be wrong in principle to borrow against future wages – say for a holiday trip or a new TV. This is quite different to credit used as capital for new production. Perhaps it is also different to borrowing to buy a bike in order to go to work, in which case the bike could be counted as capital.

I am trying to get to the bottom of what kind of credit is good and just and universally beneficial, and what sort of credit is ultimately harmful and unjust. What is the principle that should inform credit?

Joseph

[David Taylor]

Would the distinction be borrowing for the creation of wealth as opposed to borrowing to enjoy wealth which is not yet earned?

There is an added complication when we borrow against an asset eg
a mortgage, the wealth (the asset) is plainly allready created but the borrower has not yet earned sufficient wealth to buy it. This is thought to be acceptable and desirable since the assets exceed the liability (unless the market slumps) then there is a problem and much suffering.

[Joseph Milne]

[Brian Chance]

Borrowing is right when it is part of the moving balance with saving, investing in new production and bank credit.

The desire to save part of earnings from the production of goods and services is natural but the effect of withholding immediate consumption in favour of future consumption (i.e. to save) is that someone else has production which they cannot now exchange.
If someone else is willing to consume it now (i.e. to borrow) and replace it later by future production this must be beneficial to the saver, because by continuing the process of lending and borrowing indefinitely, there will be goods and services available when the saver wishes to withdraw and spend the savings.

The requirements for borrowing to be right are:-
1. Borrowing must be repaid as quickly as reasonably possible out of future earnings from production of wealth (goods and services)
2. Borrowings must not exceed available savings. Savings can be invested in new production where bank credit is not used and this will reduce savings available for borrowing.
3. The balancing of saving and borrowing is by the rate of interest charged. It is conceivable that in an economy enjoying LVT and with banks doing their proper job, savers would be pleased to find reliable borrowers and would accept a low rate of interest. This would be the best way of ensuring that there would be future goods and services available to claim with their savings.
4. Borrowing must not be for the purchase of land because land is not production. Borrowing to purchase a home need not complicate the issue provided that LVT is being collected. With LVT the cost of a home would be the cost of the house only and although it is a relatively large sum, “bricks and mortar” have traditionally been regarded as a sound security for saving. Building societies managed this saving and borrowing well until they were turned into banks.

Aristotle would surely not object to the sort of borrowing described above, which is beneficial to the lender, the borrower and the community in general. He would certainly object to the trading in money currently engaged in by banks which simply benefits some at the expense of others.

Borrowing by the government to finance deficits should also be considered because it is really borrowing on behalf of taxpayers. Presently the accumulated debt seems to be too large to be repayable out of future earnings from the production of wealth (by taxpayers) and consequently this borrowing cannot be right.

[Joseph Milne]

Brian wrote:

[Brian Chance]

Joseph

Perhaps the short answer is that it is not necessary to refrain from borrowing in order that the saving can be used as loans for new production. Bank credit can be used for new production instead.

The general effect of bank credit for additional future production is that the bank, acting on behalf of the community, creates new money, which is then used to divert current production into the new project, thus deferring current enjoyment in favour of greater enjoyment later after the credit has been repaid. It is in effect additional saving and it is the bank’s job to assess whether or not it is appropriate.

It is all a dynamic balance between saving, borrowing, credit and investment, managed by the invisible hand. In an exchange economy, production must be exchanged before it can be consumed and the aim should be an optimal efficiency of exchange. If someone wishes to produce now and consume later (i.e. to save), is it not actually necessary for someone else to consume now and produce later (i.e. to borrow) and the sooner the better? If the saver could have consumed immediately without preventing investment with bank credit, why should it be less ethical for someone else to consume instead?

My general view is that all this would work well by itself if the ground rules were followed:
1. The economic rent of land to be collected and used for communal expenditure.
2. Money and banking to be employed solely in the direct service of the productive economy.
3. Government income and expenditure to balance over time.
4. No money to be created other than as bank credit. (see “Money Supply” topic).
5. All borrowing to be repaid promptly from the proceeds of wealth production.

Does this seem convincing? What would Aristotle think?


Brian

[Joseph Milne]

Brian,

Thank you again for patiently explaining this relation between saving and borrowing, as distinct from investment in wealth creation. Your crucial statement from the point of view of my question is:

“If someone wishes to produce now and consume later (i.e. to save), is it not actually necessary for someone else to consume now and produce later (i.e. to borrow) and the sooner the better? If the saver could have consumed immediately without preventing investment with bank credit, why should it be less ethical for someone else to consume instead?”

My difficulty with this completely logical explanation is that it assumes that an equivalence between saving and borrowing equals the ethical. This is to reduce the meaning of exchange merely to quantity. It is in line with the modern tendency to see economics solely in mathematical terms. This in turn reduces the object of economic activity to demand on more production. But also, this draws no real distinction between lending for producing new wealth and lending for consumption, apart from the fist instance involving credit and the second involving savings.

Your explanation practically implies it is a vice to save if in doing so you do not put a demand on production. You use the expression “efficiency of exchange” as though this were of itself a virtue. To extrapolate from that would imply that the faster exchange can take place the better the economy. And this implies that the more productive an economy is the more ethical it is.

My problem with this – logical as it is – is that it does not touch upon the ethical dimension at all. It reduces the economy to mere exchange of goods and this makes “work” meaningless in itself. I suspect also that this “efficiency” model of economics has only come into being because of the land question, and where wages are forced down to the least labour is prepared to accept. Since in our discussion we are assuming the establishment of LVT the compelling forces for efficiency as an economic virtue practically vanish. Time does not liberate from being something that should not be lost.

But to be more specific, at the heart of the saver lending to the borrower for his present enjoyment lies the question of interest or, in short, usury. You ask, what would Aristotle think? He is absolutely clear that interest on lending money is an abuse of the nature of money. He says:

"The most hated sort (of wealth getting) and with the greatest reason, is usury, which makes a gain out of money itself and not from the natural object of it. For money was intended to be used in exchange but not to increase at interest. And this term interest [the word tokos, which in Greek also means 'breed' or 'offspring'], which means the birth of money from money is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of getting wealth, this is the most unnatural." (Politics, 1258b)

Now if our saver lends to the borrower who desires to buy a plasma TV at any rate of interest, he is using his money to generate money without creating any new wealth, or exchanging any wealth. In short, he has put a claim on the borrowers future wealth-making without an equivalent exchange. Even the books do not balance at the end of the transaction, because the lender has received a portion of the borrowers wealth in exchange for nothing.

This kind of economic exchange was always regarded as unethical until the 17th century, by Judaism, by Solon in Athens, by St Augustine to Aquinas in Christianity. It is worth seeing how Thomas Aquinas shows how usury (all interest) is unjust. He says:

"R. To take usury for the lending of money is in itself unjust, because it is a case of selling what is non-existent; and that is manifestly the setting up of an inequality contrary to justice. In evidence of this we must observe that there are certain things, the use of which is the consumption of the thing; as we consume wine by using it to drink, and we consume wheat by using it for food. Hence in such things the use of the thing ought not to be reckoned apart from the thing itself; but whosoever has the use granted to him, has thereby granted to him the thing; and therefore in such things lending means the transference of ownership. If therefore any vendor wanted to make two separate sales, one of the wine and the other of the use of the wine, he would be selling the same thing twice over, or selling the non-existent: hence clearly he would be committing the sin of injustice. And in like manner he commits injustice, who lends wine or wheat, asking a double recompense to be given him, one a return of an equal commodity, another a price for the use of the commodity, which price of use is called usury." ((Summa Theologica - Secunda Secundae Pt.2)

It is clear from this that Aquinas understands money solely as a medium of exchange, and that to give it any other use is to abuse it. And right use is justice. Aquinas understands that all use of things always involves an ethical dimension, and that there is no “amoral” sphere in the universe. It follows from this that the just use of things is the essence of the human relationship with the world. An unjust use of money can only arise from two causes. Either evil intent, or ignorance of the nature of money. Historically it is clear that the arguments in defence of usury are founded on a misconception of the nature of money – for example thinking of it as wealth or as active or generative in itself.

In our example of the saver lending to the one desiring to have a plasma TV is lending, we must presume, only because of the interest he will receive on the loan, or the interest the bank will receive on the loan.

I would suggest, then, that it is not the efficiency of the economy that drives the lender, but the usury. The only solution to this is to lend at no interest, since money cannot generate any other outcome by its nature. Its only right use is equivalent exchange.

There is also the question of the ethical aspect of the borrower. First, if he cannot borrow without interest, would the saver (or his agent, the bank) lend to him? Only out of kindness and at no gain. But this would no longer be a “commercial” arrangement and would become what Aristotle called “housekeeping”, the real basis of the economy.

However, I see a further ethical dimension to this. To borrow for the plasma TV is to place one’s future in bondage. I admit that neither Aristotle nor Aquinas raise this point, nevertheless to make any kind of bond should only ever be for the sake of the common good, and this example does not fit that criteria.

But where Aquinas is clear is that in cases of need, then what is needed should be given and not loaned, let alone loaned at interest. I believe we can see that the desire for the plasma TV is not a need. However, if our saver did simply give the money to the borrower for his plasma TV your criteria of balancing the books would be fully met. And since no interest would be involved, nor bondage of the future of the borrower, the ethical criteria of Aristotle would also be fully met. I would suggest, from what I have already said, that where interest is involved your criteria of balancing the books is not met.

Again, please forgive this long reply. For the sake of keeping within bounds, I attach the whole section of Aquinas on usury. It is a seminal text, and also the text that later thinkers tried to distort to argue in favour of usury.

Joseph

[Brian Chance]

Joseph

I agree wholeheartedly about interest. There is no justification for the charging of interest. The rise of usury is, as you seem to suggest, the result of the private appropriation of the economic rent of land.

The question of the ethics of borrowing and lending remains, whether or not there is an interest charge. May we therefore leave the discussion of interest for another occasion.

What is “enjoyment”? This must include both present and future enjoyment without differentiation. Productive Capital is wealth used for the production of more wealth and the fact that the additional wealth will not be available until the capital is in use does not render it any the less enjoyable.
Should there be differentiation between different forms of enjoyment? Is a plasma TV to be preferred to a beautifully bound set of the works of Aristotle? Or vice versa?
I think the nature of enjoyment is dependant on the moral character of the community and need not be particularised to borrowing.
The ethos of a society freed by LVT would stimulate the use love and reason to create that which was harmonious, beautiful and sufficient. As you say, the just use of things is the essence of the human relationship with the world and after the introduction of LVT this would happen naturally.

An ideal community would not need lending and borrowing. It would operate like a family in which whatever was available would be given for use where needed, in the certain knowledge that sooner or later whatever was needed by the giver was received. This would indeed be “Housekeeping” which I have understood to be the meaning of “Economics”
Unfortunately we have separated ourselves into smaller and smaller families where giving is balanced against receiving. It is now called lending, borrowing and repayment. The result is that without borrowing and repayment there can be no lending and the natural distribution of the fruits of labour is frustrated.

So – back to the question of when is borrowing right?

Borrowing is right when it enables the lender to enjoy the fruits of his labour at a future date of his own need. It is repayment by the borrower from the proceeds of future work that makes available the fruits of that work for the original lender to enjoy. If this wealth is not then available it will not be possible for the original lender to satisfy his need. The whole is an expression of giving and receiving.

I hope that this reinforces our general agreement.

Brian

[Joseph Milne]

Brian,

Thank you for this very rich response which has ventured much further than before and brings us into agreement. I shall reply in two parts.

First, you say:

“Borrowing is right when it enables the lender to enjoy the fruits of his labour at a future date of his own need. It is repayment by the borrower from the proceeds of future work that makes available the fruits of that work for the original lender to enjoy. If this wealth is not then available it will not be possible for the original lender to satisfy his need. The whole is an expression of giving and receiving.”

An implication here is that if the saver did not allow his savings to circulate in the economy through lending, those savings would leave exchange incomplete and also decrease production while not in use. While this may be so, I seems that once the saver has enough to buy what he saved for the balance would be restored anyway. So it remains a question about the time factor in the exchange, not in the exchange in principle. Does deferred exchange really effect the final outcome?

If the loan was in the form of the plasma TV itself, then the deferment makes no difference to the production of wealth. It is only when money enters that this question of decrease of production arises. Money seems to introduce a time element which barter or lending of actual wealth does not.

Nevertheless, I am prepared to accept your argument of completion of exchange as justifying the saver lending for the borrower to immediately enjoy.

Second, you introduce some enormous implications about the moral character of the community in which LVT is established. You say:

“An ideal community would not need lending and borrowing. It would operate like a family in which whatever was available would be given for use where needed, in the certain knowledge that sooner or later whatever was needed by the giver was received.”

Now I think this goes to the heart of my question about borrowing. All along I have felt that the borrower somehow puts himself into bondage to the future by borrowing, because by borrowing he has spoken for his future earnings. As he moves into the future he is paying for his past. This means that he has diminished options should he fall into hard times or need to meet some unexpected expense or illness.

In the current situation where there is no LVT his situation is even worse, and he is unlikely to borrow without interest. So now he not only has more to pay because of interest, he is also tempted to take out an insurance policy to protect him if he defaults on his repayment. This gives us three claims upon his future earnings. Of course, these factors could simply act as a deterrent against borrowing! But my point is that a community that puts its citizens in this kind of bondage to one another has introduced and tolerates injustice. Where this is acceptable can only be where justice is not clearly seen and held to.

By contrast with this you explain that in the ideal community no such obligations would exist – because balance between giving and receiving would occur naturally, sooner or later. In other words, given a just ground for producing wealth, as LVT would do (along with good regulation of banking and abolition of usury), all the distortions of the economy would be removed and there would be a natural correspondence between individual desire and the common good. In ethical terms this means the good and beneficial outcome is the one that follows when nobody puts their future earnings in bondage. The just society is the one with the least obligations.

We might say that in the current state of affairs that the good outcome which would occur naturally in the just community can only be approximated through enforcements imposed upon all parties. This is a moral difference. And it would seem from this that justice can only be understood in an ideal community. Or rather, the ideal community is ideal only because it understands justice.

If these things are true, then the study of economics cannot be separated from the study of ethics, as it is currently. This should hardly be a surprise since all economic thinking was part of ethics until recently when it has been reduced to quantitative models. While it is true that money and banking can indeed be understood purely numerically (as balancing the books), this view fails to see that what drives all economic transactions without exception is ethical commitments of some kind. It is the failure to see this that allows in the idea that money can generate money, as with usury for example.

Thus it follows that a truthful understanding of economic exchanges corresponds with the ethical understanding of them. Only when these two converge do we have economic justice.

Joseph

[Richard Glover]

If we could trust and love each other sufficiently, wouldnt the common good be best served through gift in response to need? Failing this, doesnt it mean that we have to resort to honour and ethics.

In asking our neighbour for a packet of butter, promising to replace it when the shops are open, what are the ethical considerations? If the neighbour has any to spare, then the common good is served through handing over the butter. It seems that the fewer subtle strings attached to this giving the better for all. Hence can it ever be ethical to expect the butter to be returned?

But then, can it ever be ethical to expect butter from a neighbour, let alone to demand or to even steal it?

Does ethics apply to our expectations of each other?

Can it ever be ethical to secure a luxury product, one that does not meet a need? Perhaps this is stretching the sense of luxury, but the plasma TV involves a substantial use of natural resources, puts some of these resources in a relatively inaccessable form, and inevitably involves the use of our descendents herritage of fossle fuel.


Slightly off this central point:

Some of the preceeding discussion has revolved around savings and subsequent drawing on them, borrowings and subsequent repaying them. What can help in our attempts to understand how this works is to consider the whole community whilst it is neither growing nor shrinking, viz. a steady-state economy. At any time there can be some saving and perhaps others borrowing. 2 suggestions

It would be prudent for even the steady-state community to save in aggregate so as to provision for the unexpected, just as Joseph managed in Egypt. In bad times, these reserves would be depleted (just) and in better times replenished. This could be seen as saving and deferred consumption in good times, and the opposite in bad times.

If the community is fully engaged in producing and enjoying products and services, there is no need to additional money to be created by the banking system, even to invest in new production facilities. This is because there will always be some parts of the community engaged in implementing new productive capacity so as to replace the old.

However, if parts of the community were less than fully engaged, then new money would need to be created to support the necessary increase in economic activity. This would necessarily involve bringing on new productive capacity, and in engaging the otherwise under-engaged.

[Joseph Milne]

Richard, you propose the following:

“If we could trust and love each other sufficiently, wouldnt the common good be best served through gift in response to need? Failing this, doesnt it mean that we have to resort to honour and ethics.”

In one way or another this question and observation runs through philosophical reflection on society since Plato and Aristotle. In the Laws Plato argues that a state is likely to flourish and survive only if it is founded in the virtues of wisdom and courage. Wisdom here means truthful knowledge of the law, and courage means the resolution to hold to that knowledge.

For Aristotle only the virtuous person is able to live in accordance with nature, that is, in accordance with human nature and the nature of reality as such. Only such persons, according to him, may rightly be called “citizens”.

In the Christian view, the condition of Eden is where the human and the Divine will are united in absolute goodness.

These views have each been taken up together particularly in medieval reflection on Law and the nature of society. What emerges when all this reflection is brought together in a synthesis in Aquinas is three orders or levels of understanding of Law. These are the Divine Law, the Natural Law, and Human Law.

The Divine Law is simply the law of absolute wisdom and goodness, the human state of spiritual grace in which all things are held in common, or where possession as we normally understand it has no existence. This, I think, is what you are describing, where love and trust would serve the common good, and all obligations superseded by conferring gifts.

The Natural Law is the knowledge of the perfect justice that runs through all Nature, the law of each being in itself and in its relation to the whole. It is the law that, when discerned, shows how the whole of Nature is united in an orientation towards perfection and universal justice and goodness. It is the law of fulfilment of natural being. This, I believe, is the form of law that Henry George apprehended and worked to articulate in all his writings.

The Human Law is the “written law”, the law formulated in acts, decrees, bills, treaties, civil regulations etc. Ideally this law should be consonant with the Natural Law. Aquinas says that any written law that is not consonant with the Natural Law is not truly law and does not have the force of law. The Human Law is the law that our modern societies mostly call upon and are mostly concerned with.

However, in recent centuries a split has occurred in the schools of thought on law, and one school holds that all such law must have an ethical ground, and the other school, known as positive, holds that law is simply command or will of authority. One might say, for example, that the rules of cricket are simply laid down by command or convention and have no ethical status. The “ethics” belongs to the players, not the rules or laws of the game.

It seems to me that these three levels or orders of Law are very helpful in sorting out questions of justice in society generally, and for economics in particular. They are three ways in which any community will inevitably organise itself, or understand the nature of Law. And it seems to me that any community is by nature the embodiment of its understanding of Law. That itself appears to be a law.

In our present discussion of borrowing and lending we would appear to have the possibility of understanding it on each of these three levels. In terms of Human Law we may simply argue that any such arrangement should be legal, and insofar as it is legal no ethical question need be raised. I think in general at this time the economic realm understands itself in this way. This results in viewing all economic exchanges in a very limited way, and the concern for the common good is lost in legislation for individual good. In human rights legislation, for example.

But if all economic exchange, including borrowing and lending, was viewed from the perspective of Natural Law, then the common good would be the measure of justice. The common good would include the whole of Nature, and so the effect of any transaction or form of production would be part of understanding its justice. This would include the effects on society and upon the environment and upon the future. Justice would be the same as acting in accordance with the nature of reality as such.

A further thing distinguishes these two levels or perspectives. While the Human Law seeks to assure justice between the partners in any transaction (commutative justice) for mutual advantage, the Natural Law seeks to assure justice for the common good, or simply for justice itself. The aim for the common good of itself assures the individual mutual good.

Further, the more a community relies upon the Human Law (especially as positive law) to assure its desires may be satisfied, the more laws it makes and instead of tending towards the level of Natural Law it tends towards litigation. When it tends towards litigation a community sees Law as little more than a means of satisfying personal desires in the name of justice or rights. The result of this is that every member of the community is enticed to try to take advantage of every other. Justice becomes seen as no more than seeking private ends.

What then of the Divine Law? From the point of view of positive law the Divine Law looks like sheer fantasy or impossible idealism. From the point of view of the Natural Law the Divine Law looks like the final end or ultimate fulfilment of Law. Since, according to Plato and Aristotle, by nature all things desire the Good or the perfection of being, the Divine Law is really the first or primordial intuition of Law.

What is clear from the philosophers, however, is that the Divine Law cannot be embodied in a community without there first being a clear understanding of the Natural Law and universal justice. In Social Problems Henry George insists that the only way to pure Christian goodness is through the understanding and establishment of justice. The intellectual grasp of the nature of justice is the soil from which the knowledge of perfect goodness can grow for a society.

This also seems to be Plato’s and Aristotle’s understanding. The “Good” is known through justice. Justice has the peculiar distinction of being in the very nature of things and also a human virtue. According to Aquinas, following Aristotle, to act justly is to act in accordance with the truth of things, and to act in accordance with the truth of things requires first the virtue of prudence, which is right discernment or right discrimination.

If we are to follow these philosophers in this, and Henry George too, then the possibility of the realisation of the community ruled by trust and love, where all obligations are relinquished and all moral rules redundant, may come about only after the laws of Nature are known (Natural Law) and justice is performed for its own sake. What seems very clear is that we cannot simply leap from injustice to goodness, like the hippies of the 60’s tried to do. Rather, the journey to the Good involves the cultivation of all the human faculties and the virtues as a natural development, so that the arrival at the Good corresponds with the flowering of human nature itself.

So, I agree with your suggestion wholeheartedly, and sorry if “yes” takes so many words.

Joseph

[Richard Glover]

Joseph,

Thank you for this most beautiful response. A clear understanding of these 3 aspects of law seems to be essential when considering economics with justice.

Are you now closer to an answer for your original question? "Should an individual obtain a loan for some luxury he desires?"

[Joseph Milne]

[Joseph Milne]

I would like to reflect further on this discussion of borrowing.

It seems there is a difficulty in finding a correlation between what is “commercially just” and what is truly ethical. Commercially it seems right that all parties of any exchange satisfy their desires and no party feels they have lost anything. In short, the books balance. Clearly this is a kind of justice.

Nevertheless, for my part I still feel that borrowing for the plasma TV is in some sense unethical. So the question is: where does this sense that it is unethical arise from? Is it more than a mere feeling?

Here I think Aristotle helps us. He approaches the question of economics not in terms of satisfying arbitrary desires, but in terms of usefulness and the common good. By this he means that there is a correspondence between the natural human desires and the good of the whole community, and a further correspondence between the good of the whole community and the abundance of Nature. This set of correspondences he simply calls “natural”. Consequently he calls usury “unnatural”.

In light of this we can begin to question the desire to borrow to buy a plasma TV. We may ask how the desire to borrow for the plasma TV corresponds with the attainment of the common good, and we may also ask if the making of the plasma TV corresponds with the common good and stands in a right relation with the superabundance of Nature.

For Aristotle the first fact of economics is that Nature is ordered in such a manner that it provides sustenance for what it generates. Since humanity is generated by Nature, then Nature makes full provision for the full flourishing of humanity. Nature is not, as in modern economic thinking, mere “resources” or “raw materials” for human exploitation. On the contrary, Nature is the active nourisher and sustainer of all living beings including humanity, and it follows from this that the right life of humanity is a way of life fully in accord with the work of Nature.

It hardly need be said that this way of looking at economics deals with the land question – that which generates humanity and sustains it in being cannot become private human property. But more than this, Aristotle’s understanding of the correlation between the human good and the common good a the key to the origin of economic justice. It is a justice in the very order of things taken as a whole.

Looked at in this way, there is a shift from seeing economics merely as the play of arbitrary human desires (the current view), to an order which aims at the full flourishing of human nature in accordance with Nature as a whole, or a correspondence between the individual good and the common good. For Aristotle the individual cannot fulfill their own nature apart from the common good. This means that individuals can only truly be themselves through justice. This is why Aristotle understands man as essentially a political being – the being who can understand law.

Again, from this perspective, the ethical dimension is the ground of economic understanding, and not a level to be imposed on it from outside – as Hobbes and Lock assert.

Where now stands the question of borrowing for a plasma TV? To say the least, it cannot be argued that the desire arises in accordance with the common good, and so we have to wonder why there should be a disparity between the individual desire and the common good.

But there seems to me to be an even deeper level. Why should it happen that anyone should need to commit their future earnings to having now what they cannot now afford? If Nature makes full provision for humanity, and if the whole economy were in accord with Nature, would there not be a correspondence between natural human desire and the immediate provision of Nature and the human economy? It seems to me that in such a circumstance we would not seek to purchase from future earnings (borrow), but rather we would make natural provision for the future generations. We would give to the future rather than try to take from it. The economy would then mirror that order of Nature which makes provision for all life out of its natural abundance.

Let me close by contrasting this view with the prevailing view. Currently our economic activity is making less and less provision for the future, so that future generations will be compelled to build from almost nothing for themselves. Nothing reflects this wrong relation with the future more clearly than each generation having to borrow large sums from its future earnings for its own education.

Joseph

[Chris O'Brien]

Thanks guys, for an absolutly fascsinating discustion on the ethics of saving and borrowing. However I got a bit lost in the end. If we want to explain it to the 'man in street' it needs simplification. If I give my views, I would very much like a response, in the terms of yes, maybe or rubbish.

It seems to me that everyone needs somewhere to live but not a plasma TV. Therefore one may need to borrow to buy a house. If we had full LVT then buying a house would be the same as buying caravan or a mobile home and it's value would start to go down as soon as it was purchased. Also in an LVT world I assume that taxation on production would be much reduced so you might have to borrow lump sums for your children's education or healthcare. This borrowing would be 'moneylending' but of a higher ethical value than for a TV. Maybe it could be handled by mutual societies. However if it were not funded by bank credit then it would have to come from other people's savings, like the old building societies. A charge for admin would have to be made and the savers would expect something as otherwise they would not save and spend all their income immediatly. Call it interest if you like.

Now, money for tellys, holidays etc. This could be handled by non bank moneylenders but NO CREDIT! That would be handled by the banks and lent for production of wealth ONLY! The moneylenders would borrow savings and lend it on, adding a charge. I do not see an ethical problem with this as if one wanted a 50" telly you would pay more than for a 24" one. Equally, if you were not prepared to wait and wanted your telly now, by using borrowed money, it would cost more.

I would see all this overseen by government enforced by statute law. Ethics are great but I do not see them becoming popular any time soon.